Question 5 (Table) Based on the table, who has a comparative advantage in making steel? Hint: Compute the comparative advantage for producing steel for the two countries: Canada's Production Possibilities Tons of Steel 15 Airplanes · 10 4 12 Mexico's Production Possibilities Tons of Steel Airplanes 9. 4 6. O A. Canada has a comparative advantage in producing steel since Canada's opportunity cost of 1 unit of steel = 0.8 vs 1.0 for Mexico. O B. Canada has a comparative advantage in producing steel since Canada's opportunity cost of 1 unit of steel = 1.0 vs 1.25 for Mexico. O C. Mexico has a comparative advantage in producing steel since Mexico's opportunity cost of 1 unit of steel = 0.8 vs 1.25 for Canada. O D. Neither country has a comparative advantage in making steel O E. Mexico has a comparative advantage in producing steel since Mexico's opportunity cost of 1 unit of steel = 1.0 vs 1.25 for Canada. 42T 20

5. The price of trade Suppose that Greece and Austria both produce rye and wine. Greece's opportunity cost of producing a bottle of wine is 5 bushels of rye while Austria's opportunity cost of producing a bottle of wine is 11 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Greece and Austria consider trading wine and rye with each other. Greece can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of wine for each bushel of rye it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of rye) would allow both Austria and Greece to gain from trade? Check all that apply. 2 bushels of rye…

Table 3-5 England Spain Labour hours needed to make one unit: Cheese 1 Select one: O a. consumers who like bread O b. owners of cheese-producing companies Bread 2 8 O c. consumers who like cheese O d. owners of milk-producing companies Amount produced in 40 hours: Cheese Refer to Table 3-5. If England and Spain specialize and trade according to their respective comparative advantage, who gains in the short run in England? 40 20 Bread 20 5

(Use Table 1) Harold has a comparative advantage in and Wilhelmina has a comparative advantage in Table 1 * Harold Wilhelmina Coconuts Fish Coconuts Fish Output per day 2 1 1 1) fish, fish 2) coconuts, fish 3) coconuts, coconuts 6,